PANC 2010: Hidden Traps of ERISA

The first step retirement plan advisers should take to avoid lawsuits is to educate plan sponsors on their role as a fiduciary and their need for insurance, according to Attila Toth, Principal, Portfolio Evaluations.

Speaking on a panel at the PLANADVISER National Conference, Toth said advisers need to understand their role to their clients, clearly sign off on their fiduciary position, and protect themselves with the right kind and amount of insurance. Advisers should have E&O insurance as well as fiduciary liability insurance and plan sponsors need fiduciary liability insurance.  

Robert Kaplan, VP, National Training Consultant at ING, suggested advisers keep a fiduciary file for all client relationships. The file would include service agreements, proof of fee benchmarking, and documentation of the process used for selecting providers and investments.   

Kaplan also said plan sponsor clients should have an investment policy statement (IPS) in place and it should require ongoing monitoring.  A common thing missing from the IPS is that the document does not include a methodology for investment selection and monitoring. Advisers and their clients should revisit the IPS often and adjust plan investments accordingly, he noted.  

Peter Welsh, VP, Product and Marketing Strategy, OneAmerica, pointed out that many lawsuits are targeting the monitoring of fiduciaries.There is a problem when the plan sponsor fails to create a plan committee or there is no corporate action to officially delegate administrative or fiduciary responsibilities, and lawsuits can occur when there is a failure to monitor the appointed committee delegates.  

Welsh said meeting minutes can provide proof of prudence, and advisers can help plan sponsors understand the Department of Labor’s (DoL) thinking with online DoL tools.